How Business Size Factors in the Expansion or Re-location Process

The site selection needs of medium and small-size firms differ from those of larger firms so a singular approach to the facility location process will not fit all.

Mark Crawford (Q1 / Winter 2013)

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Financial Stability
Perhaps the most important factor for companies is their balance sheet. “Mini-manufacturers don’t have much money and generally look for the cheapest place to do business,” says Collins. “Larger family-owned manufacturers — typically 100 employees or fewer — tend to have trouble with their income statements. If these companies need to get a bank loan, their retained earnings are often too low, as well as their net worth.”

“For smaller companies, financial resources are often critical, particularly with what happened with the capital markets the past few years,” agrees Gigerich. “As a result, economic development incentive programs that help companies lower project or operating costs are often more important [for them than] compared to larger companies. For small companies, these programs enable them to hire more people or purchase equipment to support continued growth.”

Ginovus recently worked with Tabs Technologies, a technology company that provides services to Fortune 500 businesses, on a project in Lebanon, Ind. The company is experiencing fast growth and needs to hire more employees and purchase equipment.

“The City of Lebanon worked diligently with the company and our firm to provide a cash grant to our client in exchange for commitments to create jobs and invest capital,” says Gigerich. “This provided the company with capital much more quickly than traditional incentive programs could have to help support the growth of the business.”

Final Thoughts
One size rarely fits all these days in any category, regardless of company size. Ultimately, the location decision is driven by specific issues, needs, and objectives.

“For example, the critical success factors involved in siting a data center will rarely include labor variables, because the focus tends to be more on power costs and reliability and the telecommunications infrastructure,” says Shapiro. “In comparison, a company concerned with finding a location for a new shared services center is much more likely to focus on the availability of certain key skills, such as accounting and finance.”

Donovan points to the efficiency of the process. “Many smaller companies do not follow a structured process and rely to a great extent on economic development agencies, [giving them] more influence over siting decisions,” he says. Larger companies, can afford to tap various databases and develop a longer list of prospective locations. “These firms approach location studies holistically,” he concludes.